In this complex economic environment, it is essential to have a clear understanding of credit. There are a variety of ways to use credit—some of us use credit to stretch our resources and purchase high-cost assets such as a house or a car, while others use credit for daily purchases. Whatever the case may be, it is important to understand how credit impacts you. Remember, it is your responsibility to take an active role in educating yourself about credit.
Your credit report is an important tool in understanding how credit works. A credit report contains information about where you live, how you pay your bills, what loans you have taken out, and other information such as if you have been sued, arrested, or have filed bankruptcy.
Credit reporting companies legitimately sell the information in your credit report to creditors, insurers, employers, and other businesses. These organizations/businesses use your information to evaluate your applications for credit, insurance, employment, or a mortgage.
Checking your credit report is one of the most effective ways to protect yourself against identity theft. All U.S. residents may monitor their credit report for errors and unauthorized use by ordering one free copy of their credit report each year from each of the three national credit reporting bureaus: Equifax, Experian, and TransUnion, at AnnualCreditReport.com.
If you find errors on your credit report, contact the credit reporting agency. They are required to investigate and respond to you within 30 days of your notification to them.
A credit score helps creditors determine whether to give you credit. Having a good credit score will allow you to secure loans with lower interest rates, lower insurance premiums, and can influence employment opportunities.
If your debt becomes overwhelming, there are many resources to help. In Minnesota, the Department of Commerce regulates two types of firms offering credit repair services: credit service organizations and debt management companies. These firms must offer you a contract describing their fees and services, and they must register with the Department of Commerce. Before signing a contract with any firm, always check to see that they are licensed by visiting the License Lookup on the Commerce website.
Check to see if the firm is a member of a major association, such as the National Foundation for Credit Counseling or the Association of Independent Credit Counseling Agencies where the members are nonprofit agencies using certified financial counselors that meet certain quality and ethical standards using certified financial counselors.